HCL Tech offers share options to US clients

BANGALORE: HCL Technologies Ltd. (HCLT), which will be launching its IPO next week, has said it has granted share options to two of its US-based clients, GTECH and KLA TENCOR, which will result in a equity dilution of 3.5 per cent over a five-year period. The share options are attached to an inflow of revenues of Rs 750 crores from the two companies.

The company has signed contracts for supply of software to both companies. The equity stake of HCL will be diluted at market price as and when the revenues accrue to the company from the two customers. HCLT executive vice president Vineet Nayar said, this was a part of the company's inorganic acquisition strategy where clients partner HCL.

The contracts are expected to result in an average EPS accumulation of about Rs 4 per annum, net of dilution over a five-year period. Mr. Nayar said this was better than normal contracts since it reduces risk and increases the probability of revenue. With this, the total dilution in HCL would be 13.5 per cent, including the 10 per cent IPO.

According to Mr Nayar the equity share options would be granted over the contract period ensuring that any equity dilution is more than covered by the incremental increase in earnings in that year. There would be a cap on options for each client to limit the level of equity dilution. The company is also likely to finalize similar tie-ups with other customers within the next one year, as an extension of this strategy.